WORLD TRADE  
ORGANIZATION  G/SCM/N/155/SLV 
G/SCM/N/160/SLV 19 July 2007 
 
 
(07-3059) 
Committee on Subsidies and Countervailing Measures  Original:   Spanish 
 
  
SUBSIDIES 
 
New and Full Notification Pursuant to Article XVI:1 of the GATT 1994 and
 
Article 25 of the Agreement on S ubsidies and Countervailing Measures  
 
Extension under SCM Article 27.4 of the Transition Period  
for the Elimination of Export Subsidies Pursuant  
to the Procedures in Document G/SCM/39  
 
Updating Notification  
 
EL SALVADOR 
  
 The following communication, dated 29 June 2007,  is being circulated at the request of the 
delegation of El Salvador.  
_______________ 
  G/SCM/N/155/SLV 
G/SCM/N/160/SLV Page 2 
 
 
  I. FREE ZONE AND INWARD-PROCESSING WAREHOUSE PROGRAMME 
 
 Pursuant to paragraph 10.6 of the Decision on Implementation-Related Issues and Concerns 
set forth in document WT/MIN(01)/17, the request fo r an extension of the transition period under the 
procedures laid down in document G/SCM/39, a nd the SCM Committee Decisions contained in 
documents G/SCM/65, G/SCM/65/Add.1, G/SCM/ 65/Add.2, G/SCM/65/Add. 3 and G/SCM/65/Add.4 
concerning the free zone and inward-processing wa rehouse programme, El Salvador is pleased to 
submit this notification relating to the progra mme, in accordance with paragraph 1(d) of 
document G/SCM/39.
1 
 El Salvador hereby wishes to confirm that, pursuant to paragraph 4(a) of document 
G/SCM/39, the Free Zone and Inward-Processing Warehouse Programme satisfies the standstill 
requirements established therein.  
1. Title of the subsidy programme, if relevant, or brief description or identification of the 
subsidy 
 Incentives for firms operating in free trad e zones or in inward-processing warehouses. 
2. Period covered by the notification 
 2006 
3. Policy objective and/or purpose of the subsidy 
 To promote increased job opportunities through investment incentives for firms engaging in 
the exportation of goods and services, with the aim of achieving sustainable economic growth. 
4. Background and authority for the subsidy (including identification of the legislation 
under which it is granted) 
A. BACKGROUND  
 The damage to the domestic infrastructure r esulting from the armed conflict in El Salvador 
during the 1980s and early 1990s severely impa cted production sectors, investment and export 
development and prevented the application of the development programme described in this 
notification.  Following the signing of the peace accords in 1992, however, El Salvador began to 
benefit from the programme, which facilitated job crea tion – a prerequisite for alleviating poverty and 
overcoming the constraints that created such serious difficulties for the population during the 1980s. 
 The earthquakes that hit El Salvador in  2001 were responsible for heavy job losses, 
particularly for the economically disadvantaged seg ment of the population, thereby further increasing 
the need for jobs.  According to a report by the Economic Commission for Latin America and the 
Caribbean (ECLAC), total losses amounted to US$1 ,603 million, i.e., 12 per cent of GDP and 55 per 
cent of exports in 2000.  In the aftermath of this catastrophe, El Salvador needs to improve the welfare 
of its people, especially those most severely affect ed by the earthquakes.  The benefits deriving from 
the programme, by creating opportunities to maintain a nd raise employment levels and, by extension, 
                                                      
1 El Salvador's notifications pursuant to Article 27.4 of the Agreement on Subsidies and Countervailing 
Measures were circulated as documents G/SCM/N/38/SLV/Suppl.1, G/SCM/N/48/SLV/Suppl.1, 
G/SCM/N/60/SLV/Suppl.1 and G/SCM/N/71/SLV/Supp l.1.;  G/SCM/N/95/SLV and G/SCM/N/99/SLV;  
G/SCM/N/114/SLV and G/SCM/N/11 4/SLV/Corr.1;  G/SCM/N/123/SL V and G/SCM/N/128/SLV;  and 
G/SCM/N/146/SLV.  G/SCM/N/155/SLV 
 G/SCM/N/160/SLV 
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  to improve the welfare of the Salvadoran people, are therefore essential for the country's economic 
and social development. 
 By the end of 2006, the number of people directly employed by enterprises benefiting under 
the Export Processing Zones and Marketing Act amounted to 80,000.  As a result, numerous 
households now enjoy a secure source of income, em ployment opportunities, access to social security, 
education, health, a pension plan, etc.  Furthe rmore, these activities led to the creation of 160,000 
indirect jobs, thus making a total of 240,000 ne w jobs overall, accounting for 8.9 per cent of the 
Salvadoran labour force.  It should be noted that approximately 75 per cent of the jobs created through 
this programme are held by women, a large percen tage of whom are heads of household.  This has 
given them the opportunity to improve the economi c welfare of their families and afforded them 
greater access to healthcare, education and social security. 
 Exports from the in-bond assembly ( maquila ) industry amounted to US$1,602 million, 
constituting El Salvador's principal ex port product to third markets.  
 A total of 302 enterprises have benefited unde r the Law, of which 57 per cent are foreign 
companies and the rest domestic companies.  
B. LEGISLATION  
 The Export Promotion Law (approved pursua nt to Legislative Decree No. 81 of 
5 September 1974, published in Official Journal No . 180, Vol. 244, of 27 September 1974), repealed 
by the Law on the Free-Trade Zone and Bond ed Warehouse Regime (approved pursuant to 
Legislative Decree No. 461 of 15 March 1990, publishe d in Official Journal No. 88, Vol. 307, of 
18 April 1990), repealed in turn by the Export Processing Zones and Marketing Act (approved 
pursuant to Legislative Decree No. 405 of 3 Sept ember 1998, published in O fficial Journal No. 176, 
Vol. 340, of 23 September 1998) and the amendment thereto (Legislative Decree No. 464 of 22 October 1998, published in Official Journa l No. 215, Vol. 341, of 18 November 1998). 
5. Form of the subsidy (i.e., gr ant, loan, tax concession, etc.) 
 It is important to note that El Salvador is a developing country and therefore lacks the 
resources necessary to provide direct assistance to i nvestors wishing to set up domestic operations.  
Given that the purpose of this programme is to promote economic and social development, 
El Salvador is using a mechanism based on foreg one government revenue, which is to be offset by 
increased job creation for Salvadorans. 
 With regard to the form of the incentives, th ese are granted to users establishing operations 
either in free-trade zones or outside such z ones in inward-processing warehouses and entail the 
following benefits: 
 (a) Exemption from import duties on machinery, equipment, tools, spare parts and 
accessories, implements and other items need ed to carry out the activity benefiting 
from incentives; 
 (b) exemption from import duties on raw materials, parts, components or elements, semi-
finished products, intermediate products, c ontainers, labels, packing and packaging, 
samples and patterns required for carryin g out the activities that benefit from 
incentives.  Machinery, apparatus, equipmen t and any other items intended for repairs 
by the beneficiaries, including exported products that are being reimported on a 
drawback basis, may also be imported under this programme; G/SCM/N/155/SLV 
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   (c) exemption from import duties on lubricants, catalysts, reagents, fuels and any other 
substances or materials required for the firm's production activities; 
 (d) total exemption from income tax during the period in which the firm engages in 
operations in El Salvador, reckoned from the tax year in which the beneficiary firm 
commences operations; 
 (e) total exemption from municipal taxes on th e firm's assets and equity for the period in 
which it conducts business in El Salvador, as from the first year of operation; 
 (f) total exemption from real estate transfer tax on purchases of real estate for use in the 
activity benefiting from incentives. 
6. To whom and how the subsidy is provided (whether to producers, exporters or others;  
through what mechanism;  whether a fixed or fluctuating amount per unit;  if the latter, how determined) 
 The benefits or incentives will accrue to individu als or legal entities, whether Salvadoran or 
foreign, that are the owners of firms which they develop, administer or establish in or outside free-
trade zones, provided that such firms are engaged in: 
 (a) The production, assembly ( maquila ), manufacture, processing or marketing of goods 
and services; 
 (b) the provision of services related to intern ational trade, such as storage, packing and 
repacking, re-exportation, cargo consolidati on, distribution of goods and other related 
or complementary activities. 
 The subsidy is provided through exemption from  duty, income tax and municipal taxes, as 
specified in point 5 above . 
7.  Subsidy per unit, or in cases where this is  not possible, the total amount or the annual 
amount budgeted for that subsidy (indicating, if possible, the average subsidy per unit for the previous year).  Where provision of per-unit s ubsidy information (for the year covered by the 
notification, the previous year, or bo th) is not possible a full explanation. 
 Given the nature and scope of the programme , no statistical data reflecting the amount of 
incentives per unit are available. 
8.  Duration of the subsidy and/or any other time-limits attached to it, including date of 
inception/commencement  
 This will be in line with the international oblig ations undertaken by El Salvador, in particular 
under the SCM Agreement. 
9. Statistical data permitting an assessment of the trade effects of the subsidy.  The specific 
nature and scope of such data is left to the judg ement of the notifying Member.  To the extent 
possible, relevant and/or determinable, however, it is desirable that such information include 
statistics on the production, consumption, import s and exports of the subsidized product(s) or 
sector(s)  
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  COMPARATIVE TABLE 
(in US$ million) 
Source :  International Monetary Fund, Central Reserve Bank, Ministry of the Economy. 
__________  2000 2001 2002 2003 2004 2005 2006 
(a) World exports 7,782,600.0 7,510,600.0 7,837, 800.0 8,937,700.0 11,196,100.0 12,640,600.0 14,716,900.0
(b) Salvadoran 
exports 2,950.5 2,864.0 2,992.0 3 ,136.10 3,302.0 3,389.8 3,513.3
(c) (b)/(a) 0.0379% 0.0381% 0. 0382% 0.0351% 0.0295% 0.0268% 0.0238%
(d) Salvadoran net 
maquila  exports 456.00 489.00 475. 00 500.3 463.5 413.8 381.4
(e) (d)/(a) 0.0059% 0.0065% 0. 0061% 0.0056% 0.0041% 0.0033% 0.0026%